By Alison Rice. At Maracay Homes, models used to be merchandised by themes. "We did it the same way as other builders did," says David Bessey, president and CEO of the Scottsdale, Ariz., company, which closed 450 homes last year. "We had a 'garden house' with colors that were more green or beige. We had the 'traditional house' with heavy, dark furniture. And we had the 'Southwest house' with coyotes and Southwest stuff."
Today, those decorating themes are gone at Maracay, replaced by an approach based on psychographics ? a marketing and research technique that classifies consumers by their values and attitudes, rather than their demographics of age, income, and ZIP code. Now, prospective Maracay buyers walk into models geared toward the status-conscious "moderns," the family-oriented "heartlanders," or the community-involved "cultural creatives."
What's the difference? "Psychographics are about understanding what motivates people to buy the same product but for different reasons," says Gregg Logan, managing director of market research firm Robert Charles Lesser & Co. in Atlanta. That's because buyers can have identical demographics in terms of age, income, and education, but completely different sets of values and beliefs that inform their decisions. "When you just market to the demographic, you're often missing or just touching your buyer," says Tim Kane, vice president of sales and marketing for MBK Homes in Irvine, Calif.
It represents a different way of thinking for home builders, who typically have focused on demographic markers. "The traditional way of looking at home building is the life-cycle model," says Brooke Warrick, president of American LIVES, a market research and consulting firm in Oakland, Calif. "It's a marvelous predictor of when they'll do something. But it won't tell you why."
Builders and developers who have used this values-based approach do know why their customers buy ? and they're capitalizing on it. At Maracay, its share of the Phoenix market has climbed from 0.5 percent to 3.5 percent, thanks to a handful of changes that include psychographic merchandising. Other builders that have turned to psychographics have discovered additional benefits: improved customer satisfaction, more efficient ways of qualifying buyer traffic, and low cancellation rates, simply by developing a better understanding of their customers.
Model merchandising, of course, represents the most obvious application of psychographics. By designing model-home environments that appeal to specific psychographic profiles, builders tap more quickly into customers' values and visions for their homes ? not just their decorating styles.
|"Psychographics are about understanding what motivates people to buy the same product but for different reasons." ? Gregg Logan, Robert Charles Lesser & Co.|
At Maracay, for example, a heartlander-friendly model would feature antique furniture, Formica countertops, and a big dining-room table, all of which reflect the importance this profile places on family. "They're not trying to prove anything," Bessey says. Were the builder going after a cultural creative, the model would highlight entirely different things: travel photos, references to the outdoors, and the all-important recycling area for environmentally concerned buyers.
And the achievement-oriented modern? "Now, there's a house we'll upgrade," says Bessey, adding fireplaces, upgraded countertops, and a master bedroom retreat "because they want their space."
In California, MBK Homes has found similar success with psychographically oriented models. "The absorption rate is that much faster because we're appealing to three or four kinds of people," says Kane.
If a community calls for fewer than three or four models, builders must make a decision. "It's a judgment call, but it's based on who we think might be in that area," says Bessey, who adds that while one model might speak to a particular buyer profile, the message shouldn't be so strong that it turns other customers off. "We still want them to like the floor plan," he says, "even if they don't like the merchandising."
But even that can be a helpful clue in the sales process. By asking customers which models they liked and disliked, salespeople can assess what type of buyer they have and respond appropriately. "You can begin to tailor lots of things once you know what psychographic profile they are," says Kane, who credits MBK's rise in local customer-satisfaction rankings to the company's psychographic approach. "If you've got a winner with heart, you want to make sure you're stroking their ego. If they're traditionalists, they are analytical, so you don't want to get too emotional."
Psyching Out Young Seniors
Gathering that type of psychographic insight is critical with one particular home-buying demographic: the notoriously slow-to-decide active adult.
"So much [that drives] conventional home buying — marriage, divorce, birth of a child — are things that are not purely discretionary," says Paul Bessler, vice president of consumer segmentation for Pulte's Arizona region, which includes Del Webb properties. "Active adults are completely different. People don't have to buy a second home ... so [the decision to buy] is based much more on mental and psychological factors."
At Del Webb, they tease out such psychographic information through an online questionnaire that asks prospective buyers about their interests, concerns, needs, lifestyles, and other values-oriented topics.
The 80-question survey, which provides feedback to both buyer and builder, does triple duty. It identifies the most likely prospects among Del Webb's 500,000-name lead list. It suggests to buyers and salespeople what type of Del Webb community (if any) might be the best fit. And it exposes issues that should be addressed in the sales process, such as one spouse's preference for a small, all-ages development versus the other's desire to live in a large, age-restricted community with extensive activities.
|"The traditional way of looking at home building is the life-cycle model. It's a marvelous predictor of when [buyers will] do something. But it won't tell you why." ? Brooke Warrick, American LIVES|
"The darn thing works," Bessler says. "The conversion rate of the top group [based on survey results] is two to three times the rate of the middle 50 percent, which is half again as likely to buy as the bottom group." Planning Ahead
Selling isn't the only time builders can draw on psychographic research. They can also use it when they're planning products and neighborhoods.
That's what's happening at Ladera Ranch, a 4,000-acre master planned community in Southern California. After market research showed that different neighborhoods of the architecturally diverse development had attracted distinct psychographic profiles, developer Rancho Mission Viejo decided to design one phase for a specific profile: the cultural creative, who typically chooses resale over new.
"Their needs were not being addressed" in the new-home market, says Anne Marie Moiso, the developer's director of marketing. Except at Ladera Ranch, where the architectural variety and community-oriented neighborhoods had unexpectedly attracted this elusive buyer.
So the developer decided to target cultural creatives with their own village: Terramor, scheduled to open in 2003. "We specifically designed the land plan, the neighborhood, and the product offering" to appeal to these buyers, Moiso says, with energy-efficient homes and ample green spaces.
It's an approach the developer believes will be successful, given Ladera's success so far with its values-based research and marketing. Sales volume is 40 percent ahead of expectations, and cancellation rates are running at less than 1 percent. "People come here to buy," says Moiso, "and they find a product that fits."
Published in BIG BUILDER Magazine, October 2002